Breaking the Mold

MICHAEL GARRY

It has long been noted that adversity can encourage creativity. The food retailers profiled in the following pages are examples of companies that, in the midst of the nation's economic turmoil, are pursuing innovative strategies or exploring unconventional technologies designed to help them and their shoppers survive in the current climate — and position them well for the future.

Just a few months ago, Haggen, Bellingham, Wash., launched a highly ambitious shopper relations program at its Top Food & Drug banner that aims at generating the kind of true loyalty often missing from loyalty card programs.

Another Western food distributor — Associated Food Stores, Salt Lake City — has been exploring a novel thermometer that takes the temperature not of the ambient temperature in refrigerated cases but of the food itself — without touching the food. The upshot for Associated's independent retailers could be safer food and less shrink, as well as reduced energy costs.

While many retailers are deploying “green” technologies inside their stores to lower costs, a small chain in the Cayman Islands, Foster's Food Fair-IGA, has found that the store itself — that is, the construction of its walls and roof — can have a dramatic impact on energy usage.

One of the most vulnerable areas of a supermarket's operation is its perishables departments. To get a better handle on the life cycle of its perishables, Winn-Dixie, Jacksonville, Fla., has rolled out a shrink management system.

And in a twist on customer service, Fiesta Mart, Houston, is helping customers without bank accounts survive the recession with its bill-paying service, which was greatly expanded in July.

INITIATIVE 1:
Revamp Your Loyalty Program

In order to hold on to their shoppers during the economic downturn, many retailers are turning to their loyalty card programs. But Haggen, Bellingham, Wash., has another idea.

While Haggen does run a traditional card program at its 15 Haggen Food & Pharmacy stores in Washington and Oregon, the retailer is piloting a novel shopper program at four of its 17 Top Food & Drug stores in Washington. Called Top Connection, the two-month-old program offers a slew of “special benefits” to shoppers (referred to as guests) who join.

Meanwhile, Top, which does not administer a card program, offers the same advertised prices to all of its shoppers.

Harrison Lewis, Haggen's chief information officer, described the Top Connection program as “a significant departure” from traditional loyalty card programs. “You almost have to call it something other than a loyalty program. That's why we called it Top Connection. It's about building relationships.”

One difference in the program is that instead of a magnetic-stripe or bar-coded card, shoppers are provided with a 1.5-inch-square plastic RFID keychain “link.” They identify themselves at the POS by tapping the link on an RFID reader.

A detailed description of the Top Connection program, complete with a FAQ, is available at www.top-foods.com. One of the more unusual benefits is the seven-day guarantee program: If the item a shopper buys goes on sale within seven days of the purchase, the shopper automatically is credited for the difference between the regular and sale price, plus 1% of the difference.

These store-funded credits accumulate in the shopper's “personal wallet” — accessible on Top's website — over a month and can then be applied toward future purchases at a Top pilot store. Top contacts shoppers about the availability of credits via email, text message or a notice at the POS.

Another unorthodox feature of the program allows a shopper who wants to return an item to contact the Top Connection call center and have the purchase price immediately credited to the shopper's personal wallet. “No need to make a separate trip back to the store and no need to bring the item in,” according to the Top website. The pilot stores have not had a problem with shoppers taking advantage of the refund policy, according to Lewis. “Trust is an incredible thing,” he said.

Lewis acknowledged that the price guarantee and return policy might be considered highly unusual in some circles. “People may ask, ‘Why would a retailer do this?’” he said. “But we're looking at this from our guests' perspective, trying to anticipate their needs and make the shopping experience easier.”

Lewis said he is looking for the program to convert “secondary” shoppers into “primary” shoppers, among other goals. He declined to say how many shoppers have joined the program but noted that he is pleased with the results so far.

Haggen is using technology from several vendors to support the program, but key elements are provided via software-as-a-service by Accelitec/Interact, also of Bellingham. Haggen is Accelitec's first grocery retail pilot, and the vendor's technology is also being used by The Woods Coffee, Lynden, Wash.

Haggen has only begun to leverage the capabilities of the Top Connection program, noted Lewis. Other possibilities include personalized offers and allowing the shopper to pay electronically with the RFID link.
— Michael Garry

INITIATIVE 2:
Track Perishables Losses

In good times and bad — but especially in the latter — food retailers need to keep close tabs on their perishables.

Up until last year, Winn-Dixie, Jacksonville, Fla., which operates 521 stores in the Southeastern U.S., used a manual process to track the life cycle of its perishables products. But inaccuracies were found as employees jotted down data.

Between August and October of 2007 the chain replaced the manual process with a shrink management system: module 100 of Periscope, from Invatron Systems, Mississauga, Ontario. Running at Winn-Dixie's headquarters, the system tracks the disposition of all perishables, from deli to floral, that are near or beyond their freshness limit. Daily, weekly and monthly reports are generated, allowing each store, and the chain as a whole, to understand loss trends and adjust merchandising strategies.

To provide the system with data, store employees scan and record quantities of items designated to be marked down or discarded, using RF handheld terminals. They do this on a daily basis, and the accumulated data is transmitted to headquarters each night. The terminals are linked to printers that generate price-reduction stickers for the marked-down items.

The system gives Winn-Dixie “full visibility” into its perishables losses and markdowns, said Cheryl Forehand, the chain's former vice president of retail operations, who was promoted last month to regional vice president of its Jacksonville division.

Winn-Dixie's procurement and merchandising executives are able to use the reports to adjust order quantities, as well as determine the “exit strategy” for items that are designated for markdowns — “or even whether we need to carry those items at all,” said Forehand.

At the store level, if, for example, bananas are the second-largest loss item in a given month, “a manager can say, ‘I need to take a look at my ordering,’” said Forehand. “We have a tool that puts this in front of us, instead of 28 pieces of paper.” By matching actual shrink vs. markdowns and discards, stores are also able to uncover variances that point to theft.

To encourage use of the system, stores are asked to focus on accuracy and not be concerned with the amount of loss or markdowns they are tracking, Forehand noted.
— Michael Garry

INITIATIVE 3:
Take Your Food's Temperature

With the growing national concern over food safety and the prevention of foodborne illnesses, retailers have been taking a closer look at the temperature of their refrigerated perishables.

The U.S. Food and Drug Administration requires retailers to keep the internal temperature of these products at 41 degrees Fahrenheit or less. But the thermometers used in stores typically take the temperature of the ambient air inside the cases, not of the food itself.

Associated Food Stores, Salt Lake City, recently ran a test of a special thermometer — the EndoTherm Thermometer, from RefrigeratorSaver, Draper, Utah — that purports to be the only device that takes the internal temperature of perishable food in a case without touching the food. The thermometer, which contains silicone gel, sits in a refrigerated case and “mimics” the internal temperature of the products in the case.

Testing the thermometer in a variety of refrigerated cases, including produce, dairy, bakery and meat, at one of the independent retailers supported by Associated, Travis Waller, Associated's food safety manager, found that it “gives a better indication of food temperature than ambient air temperature does.”

Ordinarily, when store employees find that the ambient temperature in a case is even moderately high, they remove the packaging from a product to take its internal temperature. The EndoTherm device, by contrast, obviates the need to handle the product, preventing shrink and saving time, Waller noted. Making it easier for employees to read internal food temperature is also likely to increase compliance with the FDA food code, he added.

By tracking internal food temperature, the thermometer could allow a store to raise case temperatures, thereby cutting energy costs, according to Spencer Freedman, managing partner, RefrigeratorSaver.

Associated plans to continue testing the thermometer in other stores, but Waller said he would recommend the thermometer to Associated's independent retailers, who would be responsible for purchasing it.

Freedman said the device, which was brought to the U.S. in July, is used by retailers in the United Kingdom. The average store uses 100 to 200 of the thermometers, spending a total of about $1,500, he said.
— Michael Garry

INITIATIVE 4:
Use Superior Insulation

Any food retailer would welcome a 20% to 25% reduction in store energy costs over a 12-month period. But for Woody Foster, it was particularly sweet.

That's because Foster is managing director of Foster's Food Fair-IGA, a five-store retailer based in the Cayman Islands, a British territory located about 180 miles south of Cuba in the western Caribbean Sea; electricity in this tropical paradise costs the equivalent of more than 30 cents per kilowatt-hour — triple the average U.S. price.

Foster was able to achieve the savings at a two-year-old, 23,000-square-foot store in Savannah, on Grand Cayman, the largest of the three Cayman Islands. The store's ability to use less electricity is based on two factors: the composition of its walls and roof, and its water-cooled refrigeration system.

Instead of conventional fiberglass wall insulation, the Savannah store employs 20-gauge acrylic stucco wall panels from Koreteck, Staunton, Va., made of a steel core insulated with 6-inch-thick expanded polystyrene. Instead of a conventional roof, the store's roof consists of 24-gauge Galvalume Plus aluminum-zinc-coated steel panels (from Butler Manufacturing, Kansas City, Mo.) filled with high-R-value insulation using the Simple Saver system from Thermal Design, Stoughton, Wis.

The building materials provide “better insulation” with “higher efficiency” in maintaining the constantly air-conditioned temperature inside the store, said Shayne Howe, managing director, Phoenix Construction, Grand Cayman, the Savannah store's designer and contractor. The wall panels are also good at withstanding the hurricane-force winds that from time to time buffet the islands.

More recently, Foster's upgraded an 8,000-square-foot store using the same wall and roofing materials, creating a 33,000-square-foot structure.

Foster acknowledged that the higher-insulation building material is more expensive than conventional material. “But this is faster to put up, because the insulation comes with the product, which is a cost saving; you don't have to add it later,” he said. Factoring in the energy savings, “we're very happy with the return on investment we got,” he said.

The Savannah store also employs a groundwater-based refrigeration system from Hussmann, Bridgeton, Mo. “It uses much less energy and is much quieter” than an air-cooled system, said Foster. When the water system was down, the store temporarily used an air system and found that its energy costs rose 10% to 15% during that period, he noted.
— Michael Garry

INITIATIVE 5:
Help the Unbanked

For the millions of grocery shoppers who don't have their own checking account — the so-called unbanked — a bill-paying service at a supermarket is a valuable amenity. It allows them to pay their bills with cash, along with a small fee — a much less expensive procedure than buying a money order and paying by mail.

In hard economic times, such a service becomes even more critical, noted Stacy Garcia, area human resources manager for Houston-based Fiesta Mart, which offers bill paying at all of its 59 stores.

“They may have to hold on to their money longer and use it in other ways,” she said. “Then, when they approach the due date for the bill, they need to pay it right away to avoid a big late fee.”

When shoppers pay their bills at the customer-service counter at Fiesta Mart, creditors receive payment the following day.

Fiesta Mart, which runs its bill-paying service with equipment and software provided by CheckFreePay, Wallingford, Conn., offered bill payment for some time to only a handful of billers. But in July the chain upgraded the service to cover more than 300 billers, including a wide range of retailers, utilities and others.

The chain generally accepts only cash for bill payments, allowing checks in a few cases. Shoppers pay a fee for each payment of between $1.00 and $1.50; the fee is split with CheckFreePay, which handles actual payment through its ACH network.

Garcia sees the bill-paying service increasing traffic in Fiesta Mart stores, as well as generating revenue. The customer-service counters, which also cash checks and sell money orders, are viewed as “a profit center,” she said.

In a new twist on bill payment, CheckFreePay, in partnership with PayScan America, recently introduced a bill-payment service that retailers can offer in checkout lanes, with cashiers scanning a bar code on the bill.
— Michael Garry